Technology
Tuesday, December 5th, 2023 2:57 pm EDT
Key Points
- Financial Performance: Nio reported narrowed losses in the third quarter, with revenue amounting to 19.1 billion Chinese yuan, slightly below the expected 19.4 billion yuan. The loss per share was 2.67 yuan, surpassing the anticipated 2.91 yuan loss. Despite missing revenue expectations, the company experienced a 47% year-on-year increase in revenue.
- Market Response and Investor Focus: Following the release of financial results, Nio’s shares initially faced losses but later reversed, trading around 4% higher in pre-market activity in the U.S. Investors are closely monitoring Nio’s ability to exercise financial discipline as it aims to move towards profitability in the highly competitive Chinese electric vehicle (EV) market.
- Strategic Measures for Efficiency and Profitability: Nio’s CEO, William Li, emphasized the company’s commitment to efficiency, stating that efforts to optimize the organization, reduce costs, and enhance efficiency are already underway. The company reported a net loss of 4.6 billion yuan in the third quarter, down 24.8% from the second quarter of 2023. Nio has also taken steps to address competition, cutting 10% of its workforce last month. As part of its push for efficiency, Nio announced an agreement to acquire manufacturing equipment and assets from Anhui Jianghuai Automobile Group Corp., with plans to bring manufacturing in-house, excluding battery manufacturing. The company aims to show investors its ability to balance investments while being more disciplined with costs. Nio’s focus on efficiency is highlighted by the CEO’s statement that the company would defer or terminate projects that won’t bring a financial contribution in the coming three years. The CFO indicated an optimistic outlook for the vehicle margin, expecting a rise to 15% in the fourth quarter and targeting a margin of between 15% and 18% in 2024. The company aims to demonstrate financial responsibility amid challenges in China’s EV market, including a price war sparked by Tesla and consumer caution on spending.
Nio, the Chinese electric carmaker, reported improved financials in the third quarter, revealing narrowed losses but offering a revenue forecast that fell short of market expectations. The financial performance against LSEG consensus estimates included a revenue of 19.1 billion Chinese yuan ($2.7 billion), slightly below the expected 19.4 billion yuan, and a loss per share of 2.67 yuan, surpassing the anticipated 2.91 yuan loss. Despite these figures, revenue saw a 47% YoY increase.
Following the announcement, Nio’s shares initially experienced losses, but later reversed course, trading around 4% higher in pre-market activity in the U.S. Investors are closely scrutinizing Nio’s financial discipline as it strives to achieve profitability in the competitive Chinese electric vehicle (EV) market.
Nio’s CEO, William Li, emphasized the company’s commitment to efficiency, stating, “We have identified opportunities to optimize our organization, reduce costs and enhance efficiency.”
The company has already taken steps in this direction, such as a 10% reduction in its workforce last month, citing fierce competition in the Chinese EV market. This market is highly competitive, with Nio facing pressure from other startups like Xpeng and Li Auto, as well as industry giants Tesla and BYD. Additionally, consumer caution on spending in China may pose challenges to Nio’s strategy to appeal to the premium segment of the local EV market.
In the third quarter, Nio reported a net loss of 4.6 billion yuan, marking a 24.8% decrease from the second quarter of 2023 but still higher than the same period in 2022. Despite the loss reduction, the company continues to grapple with financial challenges.
For the fourth quarter, Nio anticipates revenue between 16.1 billion yuan and 16.7 billion yuan, representing a YoY increase of 0.1% to 4.0%. However, analysts expected a more optimistic forecast of 22.4 billion yuan for the December quarter. Nio also expects to deliver between 47,000 and 49,000 vehicles in Q4, reflecting a YoY increase of 17.3% to 22.3%.
Amidst a price war ignited by Tesla in China’s EV market this year, Nio’s gross margin dropped to 8% in the third quarter, down from 13.3% in the same period last year. To showcase financial responsibility, Nio aims to defer or terminate projects without a financial contribution in the next three years. The company is also striving for greater in-house manufacturing efficiency, recently entering an agreement to acquire certain manufacturing equipment and assets from Anhui Jianghuai Automobile Group Corp. (JAC) for 3.16 billion yuan.
Nio’s CFO, Steven Wei Feng, expressed optimism about the company’s vehicle margin, expecting it to rise to 15% in the fourth quarter, aided by reduced material and component costs and improved manufacturing capacity. Looking ahead, Nio targets a vehicle margin between 15% and 18% in 2024, underscoring its commitment to financial improvement.
For the full original article on CNBC, please click here: https://www.cnbc.com/2023/12/05/nio-earnings-report-q3-2023.html
